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Sims Metal Management Releases Special Committee Findings on UK Investigation; Goodwill Impairment



Sims Metal Management Releases Special Committee Findings on UK Investigation;
Goodwill Impairment

SYDNEY, Australia and NEW YORK, Feb. 14, 2013 (GLOBE NEWSWIRE) -- Sims Metal
Management Limited (ASX:SGM) (NYSE:SMS) (the "Company") announced on 21
January 2013 that the Board of Directors had established a Special Committee
(the "Committee") to investigate inventory valuation issues in the Company's
UK business. The Committee has now concluded its assessment of the impact of
the UK inventory write-down. The Committee has determined that a write-down of
inventory of $78 million will be required, versus a preliminary assessment of
circa $60 million. The write-down adjustment has been independently verified
by the Company's external auditor PricewaterhouseCoopers ("PwC"). $16 million
of the inventory write-down will impact first half Fiscal 2013 results, and
the balance will be reflected in restatement for prior periods results.
Details of the Committee findings and impact on the financial accounts can be
found in Appendix A.

Additionally, the Company advised the market on 21 January 2013 that a
triggering event had occurred which would necessitate an impairment assessment
of goodwill as of 31 December 2012. The impairment charges related to goodwill
and other intangible assets are, in the aggregate, $354 million. $291 million
of this impairment charge relates to North America Metals and will be recorded
against the Fiscal 2013 result. $63 million of the impairment charge relates
to UK Metals and UK SRS and will be reflected in the restatement of results
for prior periods. Further details of the goodwill impairment can be found in
Appendix B.

As at 31 December 2012 the Company's net debt to total capitalisation, post
goodwill and other intangible asset impairments, was 13%.

The Company will be amending its Form 20-F for impacted periods, and will be
filing amended 20-F's with the Securities and Exchange Commission ("SEC") as
soon as practicable. The Company currently believes that it will restate its
results for the periods of Fiscal 2012, 2011, and 2010.

Appendix A:

                      Findings of the Special Committee

Sims Metal Management Limited (the "Company") announced on 21 January 2013
that the Board of Directors had established a Special Committee (the
"Committee") to investigate inventory valuation issues in the Company's UK
business. The immediate priorities of the Committee were to determine the
amount by which the value of inventory was overstated and the impact on the
Company's accounts; conclude if the issues giving rise to the overstatement
were limited to the Company's facilities in the UK; identify the root causes
of the write-down and where breakdowns in the Company's control environment
had occurred; and to direct and oversee the implementation of corrective
actions. Additionally, the Committee was tasked with assessing, if
appropriate, any necessary actions in respect of employees and third parties
determined to be responsible. The Committee has now substantially completed
its investigation and reports the following:

1. Inventory write-down adjustment in the UK, impact on the Company's
accounts, and restatement of prior period results

The Committee, with the assistance of the Group CEO and CFO, internal audit,
PwC, and Baker & McKenzie, oversaw a thorough investigation at the Company's
Newport and Long Marston facilities in the UK. A full physical count of
inventory was performed at the Newport facility of which 85% of all the
inventory was re-weighed and evaluated. At Long Marston, a physical count was
completed which was supplemented by comparing production results with yield
recovery assumptions. Based on these procedures, the Committee has concluded
that a write-down of inventory of $78 million will be required, versus a
preliminary assessment of circa $60 million. The write-down adjustment has
been independently verified by the Company's external auditor
PricewaterhouseCoopers ("PwC").

The write-down represents circa 29% of the value of inventories in the UK and
9% of inventory on a Group-wide basis before the write-down, as at 31 December
2012. The inventory write-down will partially impact the Company's first half
Fiscal 2013 results and also cause a restatement of prior period results. The
write-down adjustment in the UK will be separately identified as a significant
item in the first half Fiscal 2013 results.

 
Table 1:
UK Inventory write-down by product category
 
(in A$ millions)              HY13         Prior Periods         Total
Recycling Solutions           $13          $50                   $63
Ferrous Trading               $3           $12                   $15
Total inventory provision^1,2 $16          $62                   $78
 
1) The full inventory write-down by Region is attributable to the Europe
reporting segment.
2) Depending on the impact of foreign exchange and the prior periods that are
restated, the amounts of the inventory impairment in the prior periods column
could vary from the amounts above.

2. Assessment of the control environment in relation to other sites including
SRS sites outside of the UK

In addition to the verification procedures completed at Newport and Long
Marston, the Committee oversaw inventory valuation processes, accomplished via
stock take and other verification procedures, at all other sites in the UK and
principal SRS sites in Continental Europe and North America. At the conclusion
of those investigations, the Committee has determined that the overstatement
of inventory was unique to circumstances at the UK locations in Newport and
Long Marston. The Committee found no evidence of control deficiencies or
inventory miscalculation at any locations other than Newport and Long Marston.
This assessment has been independently verified by PwC.

3. Identification of root causes of the write-down

The Committee's investigations have revealed that the primary root cause for
breakdowns in the Company's control environment can be attributed to the
failure to adequately supervise operations (including inventories),
responsibly safeguard assets, and failure to maintain adequate controls over
financial reporting relating to inventory. The UK operations did not properly
implement well established Group internal controls for the rapidly expanding
SRS business in the UK. Internal audit failed to perform end-to-end
walk-throughs involving transactions associated with new plants and
technologies in the UK. Additional control failures identified include,
failure to test inventory adjustments, failure to identify and halt
accumulations of excessive levels of inventories, and failure to successfully
integrate IT systems in the UK. The Committee has also identified allegations
of potential fraud in the UK, which are being further investigated.

4. Implementation of corrective actions including organisational matters

The Company will immediately implement its standard set of controls over
inventories and integrate IT systems to improve the UK control environment.
Additionally, standard operating procedures will be evaluated and
supplemented.

The Committee's investigation, while substantially complete, now shifts focus
to organisational decisions involving staff and management, and also to
improving the control environment including IT systems. The Committee has
considered, and will implement, changes that will expand the internal audit
function and broaden the scope of internal audit work. The Group CEO and CFO
are tasked with the responsibility for implementing changes in people,
culture, and controls, in the UK. The Committee will see that these matters
are addressed with urgency during the second half of Fiscal 2013.

Appendix B:

            Goodwill and other intangible asset impairment charges

The Company advised the market on 21 January 2013 that a triggering event had
occurred which would necessitate an impairment assessment of goodwill as at 31
December 2012. The triggering event was that the results for the period were
significantly less than budget. The impairment is ascribed to the timing and
value of past acquisitions.

The impairment charges related to goodwill and other intangible assets are, in
the aggregate, $354 million. $291 million of this impairment charge relates to
North America Metals and will be recorded against the results for the half
year ended 31 December 2012. $63 million of the impairment charge relates to
UK Metals and UK SRS. The inventory write-down adjustments in the UK require
the goodwill impairment in the UK to be considered in the context of prior
periods. As a consequence of this reassessment, the goodwill impairment charge
for the UK will be charged against restated prior period results.

Table 2:
Goodwill and other intangible asset impairment
 
(in A$ millions)                    HY13       Prior Periods       Total
North America Metals                $291       --                  $291
UK Metals                           --         $25                 $25
UK SRS                              --         $38                 $38
Total Goodwill and other intangible $291       $63                 $354
asset impairment^1
 
1) Depending on the impact of foreign exchange and the prior periods that are
restated, the amounts of the impairment related to the UK in the prior periods
column could vary from the amounts above.

Cautionary Statements Regarding Forward-Looking Information

This release may contain forward-looking statements, including statements
about Sims Metal Management's financial condition, results of operations,
earnings outlook and prospects. Forward-looking statements are typically
identified by words such as "plan," "believe," "expect," "anticipate,"
"intend," "outlook," "estimate," "forecast," "project" and other similar words
and expressions.

These forward-looking statements involve certain risks and uncertainties. Our
ability to predict results or the actual effects of our plans and strategies
is subject to inherent uncertainty. Factors that may cause actual results or
earnings to differ materially from these forward-looking statements include
those discussed and identified in filings we make with the Australian
Securities Exchange and the United States Securities and Exchange Commission
("SEC"), including the risk factors described in the Company's Annual Report
on Form 20-F, which we filed with the SEC on 12 October 2012.

Because these forward-looking statements are subject to assumptions and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. You are cautioned not to place
undue reliance on these statements, which speak only as of the date of this
release.

All subsequent written and oral forward-looking statements concerning the
matters addressed in this release and attributable to us or any person acting
on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this release. Except to the extent
required by applicable law or regulation, we undertake no obligation to update
these forward-looking statements to reflect events or circumstances after the
date of this release.

All references to currencies, unless otherwise stated, reflect measures in
Australian dollars.

About Sims Metal Management

Sims Metal Management is the world's largest listed metal recycler with
approximately 270 facilities and 6,600 employees globally. Sims' core
businesses are metal recycling and electronics recycling. Sims Metal
Management generated approximately 88 percent of its revenue from operations
in North America, the United Kingdom, Continental Europe, New Zealand and Asia
in Fiscal 2012. The Company's ordinary shares are listed on the Australian
Securities Exchange (ASX:SGM) and its ADRs are listed on the New York Stock
Exchange (NYSE:SMS). Please visit our website (www.simsmm.com) for more
information on the Company and recent developments.

The Sims Metal Management logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=16674

CONTACT: Investor inquiries contact
         Todd Scott
         Group Vice President - Investor Relations
         Tel: +61 4 0960 0352
        
         Media inquiries contact
         Daniel Strechay
         Group Director - Communications & Public Relations
         Tel: +1 212 500 7430

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